PayPal Bank will focus on providing services to a segment of small businesses which have previously been underbanked.
PayPal has filed an application to become a lending bank to small businesses across the US.
In a statement published on December 15, the global payments company said it had submitted its application to the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation (FDIC) to establish PayPal Bank, which will act as a loan company..
The new entity proposes to provide business lending solutions to small businesses across the US, reducing their reliance on third parties by providing added capital and liquidity to help them expand and scale.
In addition to business loans, PayPal Bank is also expected to offer customers interest-bearing savings accounts. PayPal stated it is currently seeking direct membership in the US with card networks to complement its processing and settlement activities.
“Securing capital remains a significant hurdle for small businesses striving to grow and scale,” said Alex Chriss, President and CEO of PayPal.
“Establishing PayPal Bank will strengthen our business and improve our efficiency, enabling us to better support small business growth and economic opportunities across the US.”
Mara McNeill has been selected to serve as PayPal Bank’s President. She comes with over 25 years of financial services experience in banking, commercial lending, and private equity, serving as President and CEO of Toyota Financial Savings Bank in her most recent previous role.
Why are PayPal going into lending?
PayPal has already issued over $30bn in loans and working capital to more than 420,000 businesses across the globe, according to the company.
PayPal Bank will further extend its lending capabilities, “filling a critical gap for small businesses” seeking additional capital to buy inventory and invest in order to scale, PayPal’s statement noted.
The small business loan market in the US has undergone a year of mixed developments according to findings from the Federal Reserve’s small business surveys.
Companies which were surveyed cited reaching customers and growing sales were the most common challenges for US small businesses, which has increased year on year from 53% in 2023, to 57% in 2024.
There is also a rising concern about the costs on goods and services, which was raised by 75% of firms surveyed. Furthermore, 56% of firms raised issues with operating expenses, and 51% cited uneven cash flows as challenges.
If approved, customer deposits at PayPal Bank would be eligible for FDIC insurance coverage and could provide an additional lending avenue for small businesses to overcome these challenges.
Has PayPal acted on the deregulation of US agencies?
PayPal is one of many non-banking firms which have recently applied for charter banking or lending licences in the US over the past several months.
Crypto companies such as Coinbase, and fintech firms like Nubank, have applied for National Bank Charter licenses with the Office of the Comptroller of the Currency (OCC).
One of the predominant themes of Donald Trump’s second term as President has been his handling of deregulation of US agencies, which involves the OCC and FDIC.
Trump issued an executive order in August 2025, “Guaranteeing Fair Banking for All Americans”, which removes reputational risk warnings associated with banks and ultimately, ends practices where banks deny services based on political or religious beliefs.
The executive order also highlighted that the Small Business Administration (SBA) should identify potential clients who have been denied access to lending and payments due to their personal beliefs who have subsequently been underbanked.
